Texas Beats California on Wind Power

Texas Republican Governor Rick Perry proclaimed in early July that “Texas surpassed California to become the national leader in wind energy.” Surprisingly, this Texas brag has turned out to be true. Since I wrote a report predicting this could happen four years ago, I still became intrigued at this news. How could Texas, the home state of our dear President George Bush, and the terrain of the fossil fuel captains of the world, beat green and progressive California on wind power, one of today’s most popular power sources?

My report for the Energy Foundation in the summer of 2002 was entitled: Gone With The Wind: How California Is Losing Its Clean Power Edge to…Texas??! (www.ef.org) helped spur the California Legislature to pass a policy that goes by the wonky moniker Renewable Portfolio Standard (RPS). Inspired by Europe – which prefers government mandates instead of relying purely upon the “magic” of free markets -- the RPS sets numerical targets for renewable energy for utilities. Renewable energy developers then compete to supply the clean electricity. Wind power has been the first choice of most since it is currently the cheapest renewable energy resource.

Texas recently increased its RPS goal to supplying 10 percent of its total electricity consumption by 2015. California surpassed that benchmark well over a decade ago. Current California state policy is to have renewable sources supplying 20 percent of the state’s total electricity from by 2010 and then 33 percent of total state supply by 2020.

But having plans on paper is one thing. Getting projects into the ground and up and running is another. Before getting into the nitty-gritty of why Texas beat California at wind power, let’s set the context with a little bit of history.

California Launches World’s Renewable Industry

California was held up as a role model on energy policy throughout the world for decades beginning in the 1970s, when the state came up with the novel idea that reducing energy consumption could stave off the building of nuclear power plants up and down the coastline of the state. Unlike other states, California banned oil as a fuel for electricity generation and halted construction of coal-fired power plants due to concerns about air pollution during the same decade. Yet the state’s real claim to fame came in the 1980s, when California literally gave birth to the world’s renewable energy industry. In the course of just five years, a combination of tax credits, long-term power purchase contracts and state technical assistance jumpstarted the wind, solar, geothermal and biomass power industries.

The passage of the federal Public Utility Regulatory Policy Act (PURPA) in 1978 allowed for private companies to build new power plants relying upon renewable fuels. California was the most aggressive state when it came to implementing PURPA. Among the incentives offered for wind power developers were generous state investment tax credits (which augmented federal tax credits), standard long-term utility power purchase contracts that featured fixed prices during the first 5 to 10-years of operation, and a state-funded wind resource assessment that identified California’s best wind energy opportunities.

Approximately $1 billion was diverted from federal and state taxes into wind farms between 1981 and 1985 to jump-start the world’s wind power industry in California. The end result of this effort was the addition of 1,700 megawatts (MW) of new wind power capacity to the state’s power plant portfolio. Generally speaking, 1 MW of electricity can power 225 to 300 US households. That translates into California powering as many as 500,000 homes with this amount of wind power capacity on-line some 20 years ago. Both federal and state investment tax credits were terminated in 1986 due to publicity surrounding the abuse of this investment tax shelter.

Democratic Congressman Pete Stark of Hayward, CA led the fight to terminate the investment tax credits by proclaiming, “these aren’t wind farms, they’re tax farms.” Yet California’s public policies created a global market for wind as well as other renewable energy technologies. The various federal and state financial incentives played a critical role in attracting almost $2 billion in private capital (some of which came from foreign investors) to develop wind farms in California in less than five years.

Because of the investment tax credits, wind turbine technology achieved the maturity in five years that typically takes 15 to 30 years in secluded government labs, argued proponents of these financial incentives. Ed DeMeo, former Electric Power Research Institute (EPRI) manager of renewable energy programs, notes that the use of tax credits was “far more effective than the federal wind R&D program. Though not perfect, the credits helped improve the technology bit by bit.”

In the 1990s, things started to unravel. Leading renewable energy companies such as Kenetech of Livermore, California, the world’s largest wind power company, went belly-up due, in large part, to California’s unstable power market conditions. A planning process for new power plants that was supposed by to be “biennial” dragged out for eight years — and then was overturned by federal regulators. Some 1,458 MW of planned new supply, including approximately 500 MW of new wind and geothermal capacity, was never put into the ground.

In the 2lst century, California’s business climate for the cutting edge energy technologies of tomorrow has deteriorated to the point where many of the nation’s leading clean power companies — a few still based here --have all but thrown in the towel. During the energy crisis of 2000-2001, when California needed renewable energy more than any other time in its history to avoid rolling blackouts and high-priced wholesale spot power purchases, very little new renewable energy capacity came on-line, despite developers being ready, willing and able.

Perhaps the clearest sign that California has relinquished its leadership role in promoting clean power technologies is the unfolding story of wind power. California was once home to more than 80 percent of the world’s total wind power capacity. But the state stood virtually still between 1994 and 2004, and the state’s share of global wind power capacity has shrunk to single digits. Instead, coal imports into California increased from 16 to 21 percent. Believe it or not, California now uses nearly twice the amount of coal as renewable energy!

The history of Texas energy policy has been dominated by unfettered consumption of oil, natural gas and coal. Due to aggressive energy efficiency programs, California uses less than half as much electricity per dollar of gross state product as does Texas. Because it sealed itself off from the rest of the country and refused to be part of the national electricity grid, Texas consumption per capita went up as Californians’ per capita power consumption went down over the past few decades. Texas did not even begin to seriously entertain renewable resources until 1999, when legislation signed into law by then governor (and now President Bush) included a RPS goal that was quickly surpassed by companies such as Enron Corp. and Reliant Energy, two firms implicated in the California energy crisis of 2000-2001. These two firms voluntarily exceeded the state RPS goals, citing the volatility and state’s heavy reliance upon natural gas as an electricity fuel.

Living In The Present

According to the American Wind Energy Association (AWEA) as of the end of June this year, Texas surpassed California in terms of the amount of installed wind power capacity, bringing 2,370 MW online. This compares to California’s current installed capacity of 2,323 MW. Because California’s wind farm fleet is so old, most of its machines only produce power 20 percent of the time. This compares to modern wind turbines at some of the best wind sites in Texas generating electricity 40 percent of the time. (Remember, these machines can only spin when the wind blows!) Both states are plagued by a lack of fresh investment in the transmission lines required to bring electricity from remote wind farms to urban consumers. In California, this lack of progress on new transmission has stalled new development, whereas in Texas, existing wind farms cannot always get their power to big cities such as Dallas-Fort Worth.

Mike Sloan, managing consultant with the Wind Coalition, an Austin-based wind energy advocacy organization, claims the state’s accumulative wind power capacity will total almost 2,500 MW by the end of 2006. “Texas has managed to keep its renewable energy rules pretty straightforward. California would be well-served to heed the words of Elvis: ‘A little less conversation, a little more action, please,’” joked Sloan. AWEA projects that 500 MW of wind power could come online by year’s end in California, but insiders say those numbers are overly optimistic, and that by the end of the year, Texas will likely retain its current lead. Regardless of California’s dithering, wind power has never been more popular. Current trends suggest that global wind power capacity will reach 75,000 MW by the end of 2006.

“When it comes to renewable energy sources such as wind power, California has earned a reputation for providing a lot more words than megawatts,” said V. John White, executive director of the Center for Energy Efficiency and Renewable Technologies (CEERT). “Everyone in California is in favor of renewable energy sources, but we can’t seem get to get our collective act together to get stuff into the ground to actually produce clean electricity.”

Both Republican Governor Schwarzenegger and Democratic gubernatorial candidate Phil Angelidas trumpet the virtues of wind and other renewable energy sources in campaign speeches, as do scores of other state politicians. They know it polls well. But Texas has proved that when it gets down to getting the job done, the home state of our current president – and the center of this nation’s fossil fuel industry – is better at transforming vision into reality.

“The California Legislature has set aside hundreds of millions of dollars in ratepayer funds to help buy down the cost of new renewable energy resources, but almost none of the money has been invested. Our electric utilities spend hundreds of thousands of dollars on television ads, touting their green energy programs, and yet California today is increasingly vulnerable to unstable natural gas supplies and price spikes,” said White.

Bob Gates, who helped develop some of the first wind farms in California in the early ‘80s, and is now a senior vice president with Santa Barbara-based Clipper Wind, is clearly frustrated with the slow pace of new wind development in his home state.

“In the ‘80s, we had rules that created a stable market, which is very important for the financial side of things. Today, we worry excessively. California is now considered a laggard. I think we need a wholesale re-tooling of California’s approach. It’s just too laborious to get things done in California today. We’ve known we needed more transmission access to the Tehachapi wind resource area way back in 1983, and here it is 2006, and we are still scratching our heads!” said Gates. He concluded, “To say that permitting facilities goes faster in Texas [than in California] is a dramatic understatement.”

Of course, it has to be pointed out that the air quality in Texas is in jeopardy due to the simultaneous licensing of 17 new power plants that burn coal, the dirtiest of all fossil fuel sources. In this case, the ease of permitting new power plants works against the environment. Texas state legislators are likely to exempt these power plants located upwind of the smoggy Dallas-Fort Worth area from a federally mandated plan to improve regional air quality. In fact, TXU Energy is upon local lignite, the most polluting firm of coal! In a sign that simplicity is not always a virtue, Texas regulators will treat each of these coal units as if they operated in isolation, not looking at the Big Picture of the accumulative pollution these plants will bring to the Dallas-Fort Worth region.

The Mayor of Dallas, as well as other cities, is rising up in protest. “With established wind patterns, those emissions are headed straight for North Texas, especially the six counties around Dallas-Fort Worth. How can Dallas-Fort Worth, which is a significant non-attainment area, possibly clean up the air when 17 new coal-burning plants are on the drawing board and the smoke headed our way?”

Looking To The Future

California still leads the nation on solar, geothermal, and biomass renewable energy resources. There is a long list of technical and esoteric reasons why California, despite its impressive looking public policies, is falling behind on its RPS targets. Instead of pointing fingers or going into numbing detail about the why California has fallen behind on wind – but is now leading the world on solar power – is the legacy of its past success.

In a sense, California has become the victim of its own success. The state’s private utilities may run ads touting their “green” power supply portfolios, but they then work behind-the-scenes to fight adding new supply, playing state agencies against each other, and bringing in armies of lawyers to sabotage the best meaning policies.

But the wind industry itself has also played a role in this. Costs for wind power are going up, not down, due to steel shortages and the simple math of supply and demand. (The same phenomenon is happening with solar power.) The wild popularity of wind and solar has led to shortages of raw materials, which then translates into long waits and higher prices for these clean power systems.

It seems a balance between the ever-present search for perfection that epitomizes today’s architects of California’s energy policies – and the simplistic business-friendly attitude of Texas – might well be the answer. Since California’s utilities no longer make any money off of power generation provided by wind and other renewable source built by independent power producers, they have little incentive to move forward.

As someone who moved to California in 1980, a time that marked the very beginning of global wind development on the golden hills that made this state famous, it is certainly ironic that the visionary and entrepreneurial zeal that characterized then Gov. Jerry “Moonbeam” Brown’s approach to government would dissipate into today’s bureaucratic muck. With issues such as global climate change, the terrorist threat, and clean air on the table, California, Texas and every other state in the US needs to play a role. So far, 22 states and the District of Columbia have adopted an RPS to foster new markets for clean renewable energy sources (see Race to the Top: The Expanding Role of U.S. State Renewable Portfolio Standards, www.pewclimate.org.)

California once boasted the world’s most forward-looking and sophisticated power supply system – and renewable energy sources were a key part of why the Golden State earned this reputation. Perhaps the competitive spirit, and widespread disdain for Texas, can light a fire under the state’s regulators, utilities, developers and NGO’s.

Who will be ahead come 2010? I’m not a betting man, but I’m keeping my fingers crossed that my colleagues in California will rise to the occasion, and show those good old boys in Texas that we can stop sucking our thumbs and start moving around a little dirt.